The Finance Ministry pushed back on Tuesday evening against criticism from the state comptroller regarding budgetary procedure that had led to a doubling of the expected budget deficit in 2012, saying it had already addressed many of them.
“The State Comptroller’s Report refers to the previous finance minister’s tenure,” the ministry said in a statement.
“Even before the publication of the comptroller’s 2012 report, the current management of the Finance Ministry carried out central steps addressing findings regarding the past, which significantly improve the budget preparation process and monitoring after implementation.”
The comptroller’s report, which came out Tuesday afternoon, offered several major recommendations for handling the budget.
The first was putting in place a formal procedure on budget analysis that would take into account the probability of forecasts and prices deviating from expectations. Next, it recommended improving econometric models and ensuring that there was a distinction between structural (permanent) and cyclical (temporary) deficits.
Finally, it advocated augmenting the role of the chief economist’s office, and regulating the division of power between the office heads and director-general.
In response, the Finance Ministry noted that it had already taken steps to professionalize the chief economist’s office and charge it with outlining the figures at the basis of the forecast.
It said it had also taken to performing monthly reviews of the budget’s implementation to monitor whether it was sticking to plan. Finally, it noted that the two-year budget model had been eliminated.
The two-year model was problematic for budget planning because it meant that forecasts for revenues and expenditures had to be put in place some two-and-a-half years before the budget would end. The 2011-2012 budget, for example, was approved in late 2010. By the end of 2012, the deficit had ballooned to NIS 39 billion, more than double the NIS 18b. deficit originally planned.
The Finance Ministry did not address the other points that the comptroller’s report made.
The comptroller’s report was delivered as the ministry was preparing its proposal for the 2015 budget, which it will present to the government in September. Budget plans are usually presented in July, and this one was already running late when the conflict with Gaza broke out.